PARIS / ÎLE-DE-FRANCE

Transcription

1 PARIS / ÎLE-DE-FRANCE OFFICE PROPERTY MARKET Q OCCUPIER TRENDS INVESTMENT TRENDS MARKET OUTLOOK

2 KEY FINDINGS In 2017, a rise of nearly 2% in French GDP ended several years of sluggish growth. Economic activity is expected to remain steady in With 2.57 million m² in 2017 (+5% year on year), take-up is at its highest since Last year there were 96 transactions of more than 5,000 m², for total volume of just over 1.2 million m², or 47% of total take-up. OCCUPIER MARKET OPTIMISM IS THE ORDER OF THE DAY In 2017 French GDP rose nearly 2%, ending several years of sluggish growth. This recovery is all the more significant given the outlook for continuing steady business activity in 2018, in a global context that remains buoyant. Business conditions are at their most favourable in nearly ten years, and they could further benefit over the long term from AT ITS HIGHEST SINCE 2007 reforms launched in recent months and from economic policies set by the new government. These conditions will boost corporate confidence and underpin the slow but incontestable improvement in the job market. Higher pre-letting rates in Île-de- France provided one of the year s most significant trends. In 2017, 16.3 billion was invested in office properties in Île-de-France, of which 43% for 14 transactions greater than 200 million. The prime rate for the CBD remains at an all-time low (3.00%). This compression continued in other tertiary sectors, though stabilization is expected in The year 2017 will go down as one of the best ever for the Île-de-France office market, even if the market has yet to fully benefit from economic recovery. With 2.57 million m² let, take-up has risen 5% year on year, and 15% compared with the ten-year average. This was the best performance since The 4 th quarter was especially strong, with nearly 760,000 m² let, of which 55% was for properties larger than 5,000 m². In 2017, 96 large deals were made for 1.2 million m² (i.e. a 36% rise year on year and 47% of total take-up). Although the performance of small and medium-sized properties was unexceptional volume was down 13% year on year take-up remained slightly above the ten-year average. Free in the 57 M building in the 8 th ) and from the first large deal related to Brexit (Bank of America at rue La Boétie). In addition, coworking spaces continue to open across Île-de-France. In 2017 they accounted for 5% of all take-up for spaces larger than 5,000 m², compared with only 1% in The coworking phenomenon is so successful that spaces are now opening outside Paris (BAP in Gate One in Clichy, Regus/Spaces in Le Belvédère in La Défense). New leases have been signed inside Paris too, including some of the year s highest rental values (WeWork at 92 Champs-Élysées). Île-de-France office take-up, in m² 3,000,000 2,500,000 2,000,000 1,500,000 1,000, , ,576,000 Boosted by transactions for consolidation and streamlining purposes by occupiers in traditional sectors (e.g. SNCF on the SFR campus in Saint-Denis, AXA in Java in Paris 17 th ), the market also benefited in the 4 th quarter from the expansion of major players in the new economy (e.g. INCREASE IN THE NUMBER OF LARGE DEALS IN THE INNER AND OUTER SUBURBS Paris accounted for a large part of volume let in 2017 (nearly 40%, compared with 46% in 2016), largely because of a sharp increase in lettings of large properties in the 4 th quarter (16, for a total of 33 in 2017 with volume of 400,000 m²). The demand by Parisian occupiers remained strong for new redeveloped office spaces, which accounted for 93% of properties larger than 5,000 m² let last year in Paris, compared with 73% in Île-de-France. A few recently completed development projects have been fully let (AXA in Java, Europcar in Metropolitan). Projects which will not be completed for another few months have also been partly or fully let (Chanel at 52 avenue des Champs- Élysées, Pernod Ricard in Grand Central, Willkie Farr & Gallagher in Eureka). 2

3 THE OFFICE PROPERTY MARKET IN ÎLE-DE-FRANCE Q During the year, deal volume also increased outside of Paris. The number of large transactions in the inner and outer suburbs has risen since the beginning of the second half. In the northern suburbs, which in 2017 turned in their second-best performance ever, volume let rose 46% from its ten-year average. The largest transaction was in Saint-Denis, where the SNCF let 43,000 m² of office space on the SFR campus. However, deals of more than 5,000 m² were more numerous in Clichy and Saint-Ouen. If deals made in Paris 17 th are also taken into account, in the Pouchet and Clichy-Batignolles designated development zones, or ZACs (AXA in Java, OVH in Graphite, Canon in Ora), this broad north-east sector is one of the most dynamic in Île-de-France. The sector s success is hardly surprising, as it offers a number of high-quality large properties and will be linked to the extended Métro line 14 by the summer of Other areas also stood out last year, such as Nanterre, where nearly 120,000 m² of office space was let in Examples of office lettings > 5,000 m² in Q Asset/Adress Tenant Area (m²) Rent ( /m²/year) SFR Campus / Saint-Denis SNCF 43, Kosmo / Neuilly-sur-Seine Parfums Christian Dior 25, Java / Paris 17 AXA 23, Grand Central / Paris 8 Pernod Ricard 18,000 conf. Le Belvédère / Puteaux-La Défense Spaces 17, Ora / Paris 17 Canon 17, Montigny-le-Bretonneux BMW 14,400 Sale* Connect / Vélizy-Villacoublay Renault 13, Network / Bagneux Mondadori 10, rue La Boétie / Paris 8 Bank of America 9, / * Sale to occupier GEOGRAPHICAL RECONFIGURATION UNDER WAY Total available supply in the Paris region declined 6% from the third quarter and 7% year on year, to a little over 3.3 million m² as at the end of The vacancy rate came to 6.1%. Despite significant delivery volume (1 million m²), increased construction-redevelopment activity was insufficient to replenish stock. This led to a higher pre-letting rate of 62% in Île-de- France, one of 2017 s most significant trends. All indicators suggest that these conditions will continue, particularly in Paris, where only 60% of the 410,000 m² of office space expected in 2018 are still available. Because of a lack of highquality supply, companies that require a Paris address will likely renegotiate their leases or significantly anticipate the letting of high-quality office space. This will likely also be the case for the most-established communes in the Hauts-de-Seine. However, other sectors may manage to outperform. Because of their significant growth potential, several areas such as Nanterre, the northern suburbs (Saint-Ouen, Saint-Denis) and the southern suburbs (Bagneux, where Mondadori recently let 10,000 m² in Network, to be delivered by 2020) are increasingly attractive. As work advances on the Grand Paris Express, which will provide occupiers additional cost-efficient solutions, the Île-de-France office market continues to evolve. Geographical breakdown of take-up in Îlede-France 27% 16% 19% 11% 12% 16% 12% % 11% Paris CBD 28% Paris non CBD La Défense 18% Western Crescent Inner suburbs Outer suburbs 23% 3

4 INVESTMENT MARKET INVESTMENT: RECORD END OF YEAR Although 2017 may have begun quietly, investments in the Paris region grew steadily over the year as large deals were finalized. Office transactions of more than 200 million came to more than 7 billion in 2017 (+8% year on year), or 43% of total office investment in Île-de-France ( 16.3 billion). In the second half, 10 out of the 14 transactions greater than 200 million were completed. In just the last three months of the year seven deals were completed, bringing total office investment in the fourth quarter came to 7.7 billion. A record! Among the most significant deals was the disposal of Cœur Défense for 1.8 billion, the sale of Ecowest in Levallois-Perret for nearly 700 million, and the sales of 6 8 Haussmann and Intown in the 9 th. Île-de-France office investment volumes billion in addition to previous large deals in the Boucle Sud (southern loop) and Péri-Défense (i.e. submarkets surrounding La Défense), such as In/Out in Boulogne and West Park in Nanterre. The trend in La Défense showed a marked decline until the last quarter of the year. Down 70% year on year at the end of the 3 rd quarter, investment in the business district ultimately totalled over 3.4 billion in 2017, its second-best performance ever after that of While Cœur Défense accounted for a significant part (54%) of this activity, three other large deals amounting to nearly 1 billion were completed in the 4 th quarter (Hekla, Le Palatin 2 & 3, and the Cèdre tower), with the sale of Window still to come in The year-end rally also benefited the Paris CBD. While deals in the sector in 2017 declined 36% from a year earlier, the 4 th quarter alone accounted for 57% of total office investment last year, including four of the year s six deals for more than 100 million. Finally, business weakened in the 4 th quarter outside the Paris CBD and the Hautsde-Seine. Notwithstanding this slowdown, several significant transactions were completed, nearly all in the inner suburbs (e.g. Evidence A in Saint-Ouen, The Factory in Clichy, Wave in Fontenay-sous-Bois and Cap de Seine in Ivry). The increase in investment in 2017 outside the core segment reveals heightened investor risk adversity, enhanced by a lively lettings market and by scarcity of high-quality supply. The share of core plus and value-added has risen, which in 2017 accounted for 55% of all deals greater than 20 million. In this market segment, the largest deals are still exclusively for the most-established tertiary sectors (Hekla in La Défense, Grand Central and Kadence in Paris, etc.). However, a number of forward sales were completed in the inner suburbs, including several partially let operations ( Evidence A in Saint-Ouen) and speculative schemes (Citylife and Upside in Nanterre). These highlight the advantages of zones ideally located to benefit from ongoing work on the Grand Paris Express. Ranging from 3.00% to 3.25%, prime rates for offices in the CBD remained at their historic low throughout This compression was also observed in other tertiary sectors, in Paris and in several sectors in the inner suburbs. Despite further decline expected in the first half of 2018, the general trend is towards stabilization Prime yields for office properties, in % 8,00% Paris CBD Paris non CBD La Défense 7,00% ,00% 5,00% The western crescent played a highly visible role in 2017, with nearly 4.6 billion invested (+12% year on year). In recent months, sales in Levallois have boosted the sector s volume, in addition to activity in Neuilly (Alegria, 164 Peretti). These sales were 4,00% 3,00% 2,00% 1,00% 0,00%

5 THE OFFICE PROPERTY MARKET IN ÎLE-DE-FRANCE Q Examples of office investment transactions in Q Asset / Adress Seller Purchaser Area (m²) Cœur Défense / Courbevoie-La Défense HOLD Amundi / Primonial / Crédit Agr. Assurances 182,000 1,800 Ecowest / Levallois-Perret ADIA AGC Equity Partners 58, Hekla / Puteaux-La Défense AG Real Estate Amundi / Primonial 76,000 conf. So Ouest Plaza / Levallois-Perret Unibail-Rodamco Vestas Investment Mgmt 36, Haussmann / Paris 9 ADIA Norges Bank 24, Intown / Paris 9 SCOR Amundi 19, Alegria / Neuilly-sur-Seine Servier ACM 13, Cityscope / Montreuil GCI / Infrared La Française 42, Cap de Seine / Ivry-sur-Seine Tishman Speyer Primonial Reim 32, Tour Cèdre / Courbevoie-La Défense Deka Redtree / Invesco 29, Evidence A / Saint-Ouen Nexity Amundi / CDC 20, Price ( million) Office market indicators in Île-de-France Take-up 2,576,000 m² 2,450,000 m² +5% Annual growth Take-up > 5,000 m² 1,220,000 m² 900,000 m² +36 % Immediate supply 3,300,000 m² 3,530,000 m² -7% Vacancy rate 6.10% 6.60% -50 bp Prime rent* 810 /m²/year 790 /m²/year +3% Investment volume 16,3 billion 16,7 billion -2% Transactions > 100 million Share** 69% 65% +3% Prime yield 3.00% 3.00% - *Prime rent: weighted average of 5 transactions> 500 m² with the highest rents of the past 12 months, all asset characteristics included. **In total office invesment in Île-de-France. 5

6 Ile-St-Denis Rueil- Malmaison Nanterre Suresnes Sèvres Bièvres Meudon XVI Gennevilliers Colombes Asnières- sur- Bois- Seine Colombes La Garenne- Colombes Courbevoie Puteaux Villebon-sur- Yvette Vélizy- Villacoublay Boulogne- Billancourt Igny Palaiseau Issy-les Moulineaux Clamart XV XVII VIII VII XIV IX VI XVIII II I V X III IV XIII Malakoff Montrouge Gentilly Le Kremlin Bicêtre Châtillon Arcueil Massy Vanves Sceaux Clichy Antony St- Ouen Villeneuve- la- Garenne Bagneux Nogentsur-Marne Cachan Fresnes Wissous St-Denis Villejuif Rungis Aubervilliers XIX XI Thiais XX XII Vitry-sur-Seine Orly Pantin Les Lilas Vincennes St- Mandé Bagnolet Bobigny St-Maurice Montreuil Créteil Le Pré-St-Gervais Joinvillele-Pont Fontenaysous-Bois Chevilly- Larue l Haÿ-les- Roses Choisyle-Roi Ivrysur-Seine Alfortville Charentonle-Pont Maisons- Alfort CONTACTS David Bourla Chief Economist david.bourla@fr.knightfrank.com Cyril Robert Head of Research cyril.robert@fr.knightfrank.com Vincent Bollaert Head of Capital Markets vincent.bollaert@fr.knightfrank.com Marc Henri Bladier Head of Global Occupier Services & Office Agency marchenri.bladier@fr.knightfrank.com Orsay Levallois- Perret Neuillysur-Seine Saint- Cloud Le- Plessis- Robinson Châtenay- Malabry Fontenay- aux- Roses Bourg- la- Reine Paray- Vieille- Poste Verrièresle-Buisson Les Ulis Villejust Paris CBD Boucle Nord Paris Centre West (excl. CBD) Péri-Défense Paris 3 th /4 th /10 th /11 th Boucle Sud Paris 18 th /19 th /20 th Southern Outer Suburbs Paris 5 th /6 th /7 th Neuilly/Levallois Paris 12 th /13 th Paris 14 th /15 th La Défense RECENT PUBLICATIONS Northern Inner Suburbs Eastern Inner Suburbs Southern Inner Suburbs Knight Frank SNC 2018 Knight Frank s Research and Studies Department provides market analysis and strategic real estate consulting services to many international clients, whether they be private, institutional or user. Knight Frank s studies are available on KnightFrank.com The data used for the production of this study comes from sources recognized for their reliability, such as INSEE, the ORIE and Knight Frank tools for monitoring real estate markets. Despite the great attention paid to the preparation of this publication, Knight Frank can in no way be held responsible for any errors. In addition, as a general market study, this document can not reflect Knight Frank s opinion on specific projects or buildings. Reproduction of all or part of this publication is tolerated, provided expressly to indicate the source. Paris Vision 2017 Under the Eye Inside Out 2017 Coworking in Paris Global Cities 2018 Studies available on KnightFrank.com/Research